Libya unrest sends oil surging to $104 a barrel

Escalating violence in Libya sent oil prices to a 29-month high and stoked fears that a sustained run-up in prices will strain consumers still digging out of the recession.

Yesterday, crude-oil futures spiked, settling up nearly 2.5 percent to $104.42 a barrel, the highest point since it closed at $106.89 on Sept. 26, 2008 -- two weeks after the collapse of Lehman Brothers.

"This was definitely one of the more active trading days," said one New York-based crude oil trader, who declined to be named. "Oil traders were ripping and roaring today."

Hand-wringing over higher oil prices sent stocks lower despite an upbeat government report that showed the unemployment rate dropped to 8.9 percent in February. The Dow Jones industrial average closed down .72 percent, or 88.32 points, to 12,169.88.

The Standard & Poor's 500 index dipped .74 percent, down 9.82 points, to close at 1,321.15, while the the Nasdaq slipped .50 percent, or 14.07 points, to 2,784.67.

"If oil prices hit $105 and stay there for a sustained period, it acts like a tax increase on Americans and a very pernicious one at that," Moody's Analytics chief economist Mark Zandi told The Post.

Indeed, wholesale gasoline prices jumped to a 30-month high on the New York Mercantile Exchange, closing at $3.0439.

Meanwhile, retail prices at the pump have seen an even bigger jump of 29 cents a gallon since the unrest began in Libya.

According to auto club AAA, the national average price stands at 3.471 a gallon, up 4.4 cents since Thursday night.

"These price increases do nothing to help our economy," Zandi said. "At least when you're taxed, presumably those funds go toward paying for schools. When the price of gasoline goes up, that money goes to overseas suppliers."

Analysts worry that the strife in Libya might spread to neighboring oil-producing countries like Saudi Arabia.

(Source: http://www.nypost.com/p/news/business/libya_unrest_sends_oil_surging_to_62HKuKf1BGuMt6ijpgzElN)